Refi math question
I know this is a math question and Ive done the math but I'm not all that confident in my math. Here's the situation:
We currently have a 10 year home equity loan at 4.99% with PenFed which we used to pay off our actual mortgage. We're 2 years into the 10 year loan. We plan to retire, sell this house and move out of state in June 2015 (4 years and 9 months).
The two loans I'm looking at are the PenFed 5/5 ARM at 4.0% and the 3/1 ARM at 3.0%.
With my current loan, in June 2015, I will still owe $38400
With the 5/5 ARM at 4.0%, my payments drop from $1094 to $412. If I apply the additional $682 monthly to the mortgage, in June 2015 I will still owe $35000
With the 3/1 ARM at 3.0%, my monthly payments drop from $1094 to $365. If I apply the additional $$729 monthly to my mortgage, in June 2015 I will still owe $31800. Of course with the 3/1 ARM, the rate will probably rise after the 3 years. If it rises to the max 5%, my payments would go up about $95. I'm not sure how to calculate the payoff with payments going up in the middle of the loan so I did an estimate. If I subtract $100 per month (for 21 months) from the amount I add to the payments to account for the higher payment when the rate goes up, I end up owing $32900 in June 2015.
If my math is close, the 5/5 ARM saves me $3400 and the 3/1 ARM saves me $5500 (both mines whatever the fees are). This is a no brainer, correct?